Product assortment. How broad a product line should one offer? Presented with two equally attractive options, people sometimes avoid making the choice. Therefore, there should be clear differences between the Elsa Peretti in the product line. The US Department of Agriculture's Christmas tree grades include eight color-coded tree height classes. Marketers may be more successful if they focused on only three groups. The compromise effect suggests that, when consumers face a choice among three options that they can rank, most tend to choose the middle option (Simonson and Tversky 1992). Thus, if a retailer had two classes of trees, adding a third superpremium class might encourage some people to trade up and buy the Elsa Peretti Open Heart bracelet midgrade. To boost sales of the top class, marketers can increase the salient quality difference (e.g., tree height) between the middle and top classes proportionately more than the price difference (Guiltinan 2000).
Showing customers the final product, a fully decorated tree, can inspire customers to decorate their trees just like the model. Impulse sales of decorations and other complementary items (e.g., wreaths, candles, wrapping paper, foods, and other holiday products) can make significant contributions to profits. However, it is important not to offer too much variety. A study in 24 supermarkets found that eliminating some duplicate items increased sales (Willard Bishop Consulting 1993).
Christmas tree marketers can apply principles based on demand elasticity studies and psychology to improve pricing decisions and boost their marketing effectiveness.
Demand elasticity and pricing. Davis (1993) examined how familiarity with Elsa Peretti Teardrop bracelet tree species was related to willingness to pay. Using data from Hamlett et al. (1989), he found that people may pay more for fir trees than spruces and more for spruces than pines. Prices probably should vary accordingly.